Oct. 29 (Bloomberg) -- Qwest Communications International Inc., the third-largest local phone company in the U.S., plans to cut 1,200 jobs and said sales and earnings this year will be at the low end of its forecasts as customers end service.

Third-quarter net income fell to $151 million, or 9 cents a share, from $2.07 billion, or $1.08, a year earlier when a tax- related gain lifted results. The firings will trim the workforce more than 3 percent, Qwest said today in a statement.

Sales of high-speed Internet connections trailed estimates, and more consumers switched to cable companies like Comcast Corp. that offer digital calling plans. Denver-based Qwest had 11.9 million active phone lines, a decline of 8.9 percent from a year earlier. If the economy worsens, the pace of defections may pick up further, said Donna Jaegers at D.A. Davidson & Co.

``You'll have more small businesses going under and consumers figuring out how they can reshuffle their budgets,'' said Jaegers, a Davidson analyst in Denver.

Sales dropped 1.6 percent to $3.38 billion in the quarter. Analysts' estimates averaged $3.33 billion. Excluding $63 million for severance payments and a $33 million gain from a restructured lease, profit was about 10 cents a share, in line with the average estimate of analysts surveyed by Bloomberg.

Qwest dropped 20 cents, or 7.7 percent, to $2.40 at 4 p.m. in New York Stock Exchange composite trading. The shares have fallen 66 percent this year.

2008 Forecasts

The company said 2008 revenue and profit will be at the low end of forecasts. Qwest had said sales would fall by as much as 2.5 percent from 2007, and that earnings before items including interest and tax would decline 1 percent to 2 percent.

Qwest needs fourth-quarter profit to be $45 million more than last quarter to meet its annual forecast. Between the job cuts and plans to lower spending on the phone network, the company is halfway there already, Chief Financial Officer Joseph Euteneuer said today on a conference call. Sales gains from business customers and Internet subscribers will also help, he said.

Qwest added 61,000 high-speed Internet subscribers last quarter, missing the 79,000 estimate of Christopher Larsen, an analyst at Credit Suisse in New York.

The new subscribers included 40,000 using faster speeds the company has begun offering to fight cable rivals. The network upgrades that make the new connections possible are expected to cost as much as $300 million this year.

The board extended a deadline to buy back $2 billion in shares, citing credit-market turmoil. The cutoff had been the end of this year, and Qwest had $200 million remaining under the board's authorization. The company didn't say how long it would extend the timeline.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net.

Last Updated: October 29, 2008 16:12 EDT